Training wheels

11 January 2012 By Agnes T. Crane

A key measure of productivity puts Canadian Pacific dead last among North America’s big six railways. Even if a proxy fight being waged by Ackman’s Pershing Square fund isn’t successful, it could inject some healthy ambition in the company’s turnaround plan.

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William Ackman’s Pershing Square Capital Management has launched a proxy fight to remove Canadian Pacific Railway’s chief executive, Fred Green. The activist investor, whose fund holds a 14.2 percent stake in the company, wants to install Hunter Harrison, the retired CEO of Canadian National Railway, as part of his plan to turn Canadian Pacific around.

The railway’s current management plans to reduce its operating ratio, a key metric in the industry for measuring productivity, to the low-70s percent in three years from 78 percent reported in 2010. Ackman wants to push it to 65 percent by 2015. The peer average is tracking around 70 percent, according to Moody’s Investors Service.

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